Correlation Between Ruentex Development and HUA YU

Can any of the company-specific risk be diversified away by investing in both Ruentex Development and HUA YU at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ruentex Development and HUA YU into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ruentex Development Co and HUA YU LIEN, you can compare the effects of market volatilities on Ruentex Development and HUA YU and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ruentex Development with a short position of HUA YU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and HUA YU.

Diversification Opportunities for Ruentex Development and HUA YU

-0.01

Correlation Coefficient

Ruentex Development  HUA YU

Good diversification

The 3 months correlation between Ruentex and HUA is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and HUA YU LIEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUA YU LIEN and Ruentex Development is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ruentex Development Co are associated (or correlated) with HUA YU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUA YU LIEN has no effect on the direction of Ruentex Development i.e., Ruentex Development and HUA YU go up and down completely randomly.

Pair Corralation between Ruentex Development and HUA YU

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the HUA YU. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 1.04 times less risky than HUA YU. The stock trades about -0.18 of its potential returns per unit of risk. The HUA YU LIEN is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12,600  in HUA YU LIEN on December 30, 2024 and sell it today you would earn a total of  400.00  from holding HUA YU LIEN or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ruentex Development Co  vs.  HUA YU LIEN

Ruentex Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

HUA YU LIEN

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUA YU LIEN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HUA YU is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ruentex Development and HUA YU

The main advantage of trading using opposite Ruentex Development and HUA YU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, HUA YU can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HUA YU will offset losses from the drop in HUA YU's long position.

The idea behind Ruentex Development Co and HUA YU LIEN pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.